As love sickness goes, it was a near fatal case. Exactly seven days ago, many of us were waking up to some unexpected emails of admiration. Messages marked I LOVE YOU were flooding in to millions of inboxes around the world, piquing the curiosity of users just enough for them to double-click on the enclosed attachment.

One week later, and we know it was a virus: the world's most virulent to date. Combining some quite sophisticated programming with a similarly cunning appeal to the human psyche, it caused widespread damage to data and a massive loss of productivity.

The small program, containing coded instructions to both reproduce and perform tasks, was seemingly written in the Philippines. Once downloaded, it burrowed its way into your system, deleting jpeg (picture) files and hiding MP3 (music) files. Then it emailed copies of your passwords to a website in the Philippines.

Then it fulfilled its need to reproduce, and sent offspring viruses to every email address in your Microsoft Outlook address book. The only way to prevent its spread was to shut down email servers - the now essential tool of most businesses. The cost in lost work time began to add up. Estimates vary on the total, but they are all in the billions, from $2bn to $10bn, and they are growing while the virus continues to do the rounds. An estimated 80% of companies worldwide were hit.

"We estimate $2.61bn of damage has been done," says Samir Bhavnani, a research analyst with Computer Economics. "By Wednesday, the total can reach $10bn. We see damages growing by up to $1.5bn a day until the virus is eradicated."

Police in the Philippines made three arrests on Monday: the trio, including bank clerks Reomel Ramones and Irene de Guzman, were being questioned about the virus outbreak. Clues to the programmers' nationality were apparent early on. "The source code contained references to Manila and the Philippines," says Graham Cluley of Sophos Anti Virus. "The author even included his hacker's codename 'spyder'".

Virus technologist Alex Shipp and his team at Message Labs claim to be the first in the world to capture the love bug. They intercepted an infected email at 12.14am on Thursday, direct from the Philippines. They quickly realised the ensuing epidemic would be huge. "Just seeing how nasty it was, we thought it might be another Melissa," says Shipp, referring to the last major email-attached virus.

"Then someone checked how many of them we'd caught. Normally we get 300 viruses a day, from a sample two million emails. On the first day of Melissa we only got 200. On Thursday we got 13,000 of the love bug," he says. It wasn't just the programming which made this virus ultra virulent. "Making people open the attachment (by using I LOVE YOU) was simply an excellent piece of social engineering," he says.

"The programmer also stole lots of good ideas from lots of other viruses and put them all into one. There was also fairly good timing. Everybody had got over the last virus scare and had got back to their bad habits," concludes Shipp. Britain and Europe were hit disproportionately hard, he says, because of the difference in time zones between Europe and the US. The countries hit hardest depended on wherever the sun rose next," says Shipp.

"As soon as people woke up there was a peak of viral activity, and that peak was in Europe - especially the UK - first. "When it hit, it was 3.40am, New York time. We were able to ring them and say 'this virus is coming towards you in about four hours - get ready.' "Nonetheless, there was very little time delay. It spread almost instantaneously over the globe, with 10 new strains quickly appearing."

All of which paints a grim picture for an increasingly technology dependent world. Why are our computers so vulnerable? "There's a fight between PC functionality and security," says Cluley. "Microsoft could solve, say, the macro virus problem tomorrow - if it wanted. But it won't, for legitimate commercial reasons. It's never going to sell its word processor on the basis that you can't do all kinds of cool things with macros. Security always loses out to functionality. That has been the history of software.

"My three pieces of advice to any company or individual are: one, keep your anti-virus software up to date. Two, put a system on your email gateway to block dodgy attachments like the Visual Basic files we saw here. Lastly, de-install Windows Host, a program invaded by the love bug," concludes Cluley. Consider yourselves warned.